New reports that China will implement a trial target price program still lacked specific details. ChinaΆs 2013 crop dropped to 6.31 million tons (28.98 million bales), NBS says. Global growth forecast at 3.7%.
Cotton futures rallied from a triple-digit setback to finish with a modest loss Wednesday, snapping a string of six consecutive higher closes.
Spot March finished down 29 points to 87.84 cents, in the upper quarter of its 156-point range from down 156 points at 86.64 to up seven points at 88.20 cents. It traded inside TuesdayΆs range, touching the low about 8:15 a.m. CST and the high — matching the high in the wee hours of the overnight dealings — roughly an hour later.
The May contract dropped 39 points to 88.01 cents, July slipped 24 points to 87.67 cents and December dipped 25 points to 79.67 cents.
Volume slowed to an estimated 24,136 lots from 31,147 lots the previous session when spreads totaled 132,739 lots or 41% and EFP six lots. Options volume totaled 3,645 calls and 1,015 puts.
Fresh reports circulated this week that China will implement a trial target price subsidy program next season in its key Xinjiang cotton area as it transitions from its stockpiling policy.
Many specific details — such as the level of the target price — still havenΆt been announced, however. The transition has been widely expected and is not considered to have been a market factor this week.
Government spokesmen have been quoted as saying the new policy will involve market factors, including domestic and international prices, to a greater extent than the previous program.
Their comments, however, also have been interpreted as indicating that the use of reserves and import quotas will continue to play a role in efforts to maintain market stability.
The new policy, which will compensate farmers with subsidies when prices are below the target level, also will be adopted for soybeans in certain provinces.
Meanwhile, ChinaΆs cotton production in 2013-14 declined 7.7% from the previous year to 6.31 million metric tons (28.98 million 480-pound bales), the National Bureau of Statistics said.
The USDA earlier this month surprisingly raised its estimate of ChinaΆs crop by a million bales from its December forecast to 33 million, against its estimate of 35 million bales in 2012-13.
Government classing data indicates that Xinjiang production, which typically accounts for about 60% of the total, may exceed the 2012-13 output, USDA said.
In other news, the International Monetary Fund this week raised its global growth forecast for the first time in nearly two years, noting that fading economic headwinds are expected to permit advanced nations to pick up the mantle of growth from emerging markets.
The IMF predicted the world economy would grow 3.7% this year, up 0.1 percentage point from its October forecast, and projected growth of 3.9% in 2015.
Futures open interest expanded 2,937 lots Tuesday to 185,828, with MarchΆs up 777 lots to 109,697 and MayΆs up 1,899 lots to 39,234. Certificated stocks grew 13,812 bales to 66,530.
World values as measured by the Cotlook A Index gained 140 points Wednesday morning to 94.45 cents. The index premium to TuesdayΆs March futures settlement widened seven points to 6.32 cents.
